Following the $39 billion takeover from global payments company Square, early stage investors of Afterpay (ASX: APT) will be pleased the deal was done prior to the release of their FY21 results which show the handbrake has been pulled on growth in the BNPL market. 

While the percentage figures at the top of their results are all glossed up, buried deeper in the data is the fact their active customers in Australia and New Zealand came in at 3.6 million. This represented just an 8% increase in the region where their BNPL services originated and suggests that customer demand is nearing saturation. Comparatively, the region delivered 18% growth in FY20. 

Core to Afterpay being the subject of the biggest takeover in Australian history, was the Company’s growth prospects in the United States where Square is based. In North America, customer growth has also slowed with Afterpay reporting10.5 million active customers, a 88% increase on the previous year. This growth figure, however, was also well down on the previous year’s 219% growth in the region.

What may be most concerning to Square investors though, is the value of Afterpay’s North American customers which transacted AUD $11.1 billion on Afterpay from the 10.5 million customers. This would equate to an average purchase of $105. 

Comparatively, the Australia and New Zealand customers transacted $9.4 billion at an average purchase of $261. 

Despite the slowing customer acquisition growth, total income for Afterpay still increased 78% to $978.9 million. This would indicate their sale to Square came at 40x revenue which is unheard of in capital markets. 

Long flagged as one of the biggest weaknesses in the unregulated BNPL sector, delinquencies increased with a net transaction loss of $132.6m (0.6% of sales) which was higher than last year’s 42.8m (0.4% of sales). This was partially attributed to less late fees collected which had previously been used to offset bad debts. 

Afterpay’s operating expenses also increased 104% during the year to $298.6m which was attributed to higher marketing expenses in new regions, increasing their headcount from 665 to approximately 1,300 worldwide. 

While many of the financial figures will ring alarm bells for Square investors that face major dilution once the Afterpay acquisition is settled in the all-scrip deal, the biggest may be the profit after tax which was declared as a $159.4 million loss. This compared poorly against their $22.9 million net loss for FY20 when shareholders thought profitability was on the horizon. 

Nonetheless, all investors must tip their hats in the direction of Afterpay founders Nick Molner and Anthony Eisen who, as of right now, appear to have timed their exit to perfection.